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The value of telecom hopeful LightSquared’s debt is defying gravity even during bankruptcy and myriad regulatory issues. While debt holders and management continue to debate the viability of the enterprise, the market awaits the truth behind the recent secondary sales of the company’s debt, something that could emerge within the month, sources have told S&P Capital IQ’s Leveraged Commentary & Data.

Remarkably, LightSquared’s $1.43 billion in term loan debt is currently quoted near 70 cents on the dollar in the secondary market, according to sources, a level reached in May around speculation that telecom mogul Charlie Ergen was the man behind recent purchases of large portions of the debt. While there’s no trading, that’s a level that had not been seen since September of last year, ever since it became clear that the telecom project’s whole business plan could be stopped dead by an unfavorable ruling from the FCC. And before that, the debt had risen 10 points when it came out that Carl Icahn had taken a large chunk of the debt and was looking to takeover the company.

The debt has remained quoted at these elevated levels because of the large purchase that took place to grab the debt from Carl Icahn. Icahn began to buy in around December, when – for various reasons – doubts arose about the which way the FCC would rule, dropping LightSquared’s debt to about 40 cents on the dollar. Icahn invested along with Andrew Beal’s Beal Bank and Tepper’s Appaloosa. The big seller at the time was Farallon Capital Management, which dumped a $300 million stake.

Icahn then sold out just below 60 for a tidy profit in May while negotiations leading up to a bankruptcy filing were crumbling. According to reports, a fund called Sound Point Capital purchased $250 million from Icahn, as well as an additional $100 million available on the secondary. Sound Point, with connections to Ergen, was presumed by bondholders and even LightSquared management to be acting on behalf of Ergen, whose Dish Network had existing spectrum which if combined with LightSquared would have the equivalent capacity of Verizon or AT&T. It made sense at the time, but holes have appeared in the thesis that Ergen is backing Sound Point (which SEC filings show had only $178 million under management as late as November of last year).

Tim Farrar, a telecom analyst with TMF Associates, has written of such doubts. Ergen has neither confirmed nor denied any attempted grab at LightSquared debt, and Farrar says that people involved have begun to speculate it might be Carlos Slim or others behind the purchase. Sources have speculated that Cablevision, owned by the Dolan family and one of the country’s largest telecom and media company, could be a potential suitor as well.

Both theories present problems, however. If Ergen really did back Sound Point’s purchase of that much debt with the intention of taking control of much of the company out of bankruptcy, he would eventually have to disclose it to the FCC, according to industry observers. And there’s very little possibility of any of these large strategic buyers getting enough of the debt at distressed prices to wind up owning the company anyways, as many of the major debtholders have owned the term loan since it was at par and are still looking for recovery along those lines, according to LCD sources.

Regardless of who is creating the demand, to see the term loan debt reach such a level has dramatically altered expectations that the debt was merely worth the value of the spectrum under its control; as it had been pegged in the 50 cents on the dollar context following Verizon Wireless’ purchase of spectrum provider SpectrumCo in December.

Certainly distressed buyers could be looking for a “greater fool” – as some say Icahn was able to do – but many other holders, initial lenders and owners of the equity may be betting on the viability of a business that fills an urgent need.

Industry specialists agree the need for additional spectrum and network operators exists and will need to come from somewhere.

“This is a company that had a solution for a significant and growing problem in the industry,” says Jeff Kagan, a tech industry analyst following the developments in the wireless networks. The problem in the industry was essentially caused by people buying androids and iPhones, says Kagan, exponentially increasing the use of available spectrum.

“They’re saying by the end of this year, we’re going to start to experience problems. It’ll be like the 1990s with AOL dial-up [slowing down with overusage]. That’s the same thing that’s going to happen with wireless spectrum over the next few years if we don’t do anything,” he says.